That title is normally used in sport games rather for than tax or competition issues. Nevertheless, it reflects the fact that the European Commission (the “Commission”), after its decision to refer Ireland to the Court of Justice of the European Union (the “ECJ”) for failing to recover illegal tax benefits from Apple on 4 October 2017, won the first round against Ireland.
Further to its decision of August 2016, the Commission considered that Ireland’s tax ruling in favour of Apple were illegal under EU State Aid rules and ordered Ireland to recover up to 13 billion EUR. While Apple and Ireland have brought actions to cancel the Commission’s decision, this did not suspend Ireland’s obligation to recover the illegal aid according to EU State aid rules. Therefore, the Commission decided to refer Ireland to the ECJ.
The pressure exercised by the Commission and its Commissioner, Margrethe Vestager, in charge of competition policy, has paid off. Even if the Irish government criticized the measure, Ireland recently announced that an agreement has been obtained with Apple for the payment of the requested amount. According to Ireland, this large amount should be wired during the first quarter of 2018.
In the same vain, the Commission has been investigating several tax ruling practice in various Member states since June 2013 and had set up a dedicated Tax Force to scrutinize favourable tax treatment of certain companies, in particular in the form of tax rulings.
The Commission extended its inquiry to all Member states in December 2014, including a list of tax rulings issued previously for the benefit of companies like Starbucks in the Netherlands, McDonald’s, Fiat and Amazon in Luxembourg. On 4 October 2017, the Commission adopted a similar decision that forces Luxembourg to recover unpaid taxes from Amazon amounting to 250 million EUR, on the basis that tax benefits granted to Amazon were illegal under EU State aid rules.
These decisions have significant financial implications for the parties concerned as they potentially result in an obligation to repay several years of “tax savings” with interest. This means that, in addition to review tax rulings from a pure tax law perspective, companies should assess any ruling validating a specific tax arrangement in Europe in light of EU State aid law and obtain adequate State aid advice.
This has been confirmed on 21 November 2017, when Commissioner Vestager emphasized that state aid cases brought against special tax treatment “are only a part in a much bigger investigation of more than 1,000 rulings as part of that work”. It can reasonably be expected, in the near future, that the Commission open more state aid cases regarding tax rulings granted to companies regardless of their size.
Therefore, any corporate taxpayer that benefitted from a ruling from the tax authority of a Member State of the European Union in the past ten years is potentially a target of the Commission’s investigation and should be prepared for it.